Competitive theory suggests that spatial real wage and unemployment differentials should disappear as a result of the migration of labour and capital and so government intervention is unnecessary. Furthermore, the role of migration in reducing local and regional inequalities is likely to be more important now as a consequence of the reduction in regional assistance to deprived areas in the UK in recent decades, the prospect of reduced EU funding post-enlargement and the continued reluctance of firms to relocate. However, evidence presented in this paper suggests that this process, if working at all, is working very slowly. Indeed, alternative theories have been developed which emphasize virtuous and vicious circles of development rather than convergence to equilibrium. Given that labour mobility tends to be highest amongst the young and better skilled in Wales, migration is likely to lead to divergent development. This issue is of particular concern to areas such as the South Wales Valleys. It is also found that large income differences exist not only at the local level but which also appear to be widening at the regional level in the UK, with London and the South East pulling away from the national average. Given that further European
23 This interaction is also significant at the 10 per cent level in the WTM county model.
integration is expected over the coming years, in particular if the UK becomes part of the European Monetary Union, these differentials are likely to widen yet further, with the prospects of the more deprived Welsh areas likely to further worsen without regional assistance.
The paper reports that there has been a net out-migration of younger people from Wales, which can have a negative impact on the national as well as the local economy, especially if the area mainly attracts retired people. The net out-migration of younger individuals and net inflow of older and retired individuals, which results in a general ageing of the workforce, can have dramatic implications for the dynamism of local labour markets. Whilst older workers are less likely to become unemployed once employed, they generally experience longer spells of unemployment and a greater tendency to become inactive than younger workers. They are also less likely to take part in formal education and workplace training. After the age of 25, relatively few individuals gain additional formal qualifications (Dixon, 2003). This can have implications for the flexibility of a local labour market and its attractiveness as a place to invest as these areas will be less able to respond appropriately to demand shocks and technological change as they become more dependant on older workers to meet developing skill needs (OECD, 1998).
Another of the main findings is that educated people actually move and are far more willing to move long distances. This can partly be explained by those with higher qualifications facing lower psychic costs as they have been to university or met people from different backgrounds and so have already cut some of their ties with their local communities. However, although education is conducive to producing a more mobile labour force, Wales has lost a disproportionate share of its highly qualified human
capital. Furthermore, highly educated young people living in Wales also appear to have a greater willingness to move long distances. This suggests that although the Welsh economy has been successful in the recent past in creating new jobs, greater attempts should be made to create high-value jobs and to implement development strategies which distribute such jobs across the country in order to retain and attract talented workers.
The evidence also suggests a need for increased migration among certain groups e.g.
those with manual occupations and people from particular areas, especially the South Wales Valleys, since it is found that the most deprived parts of Wales have the lowest migration rates. This applies as much to in-migration as it does to out-migration since not only will this improve the fluidity of the Welsh labour market but also provides an injection of human capital into the Valleys. As well as educational initiatives in more deprived areas, reform of the housing sector could help to remove some of the impediments to mobility because of the important links that exist between housing and labour markets (Henley, 1998). For example, the movement of labour is restricted for social housing tenants by administrative restrictions on moving between local authorities, and for owner occupiers by high house prices, pre-contract uncertainties and the transactions costs that are associated with moving house. Improvements in job prospects, housing and local amenities would also encourage more people into the deprived areas. Whilst changes in the benefit system such as regularly assessing entitlement to invalidity benefits could also encourage migration away from areas where sickness rates are currently extremely high.
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35
TABLE 1 UK Regional Labour Market Statistics Population1 Unemployment Rate2Employment Rate3Hourly Earnings4Household Income5 North East 2515 6.9 68.5 10.17 82.9 North West 6730 5.5 72.0 11.08 93.0 Yorkshire and the Humber 4965 5.4 72.9 10.66 92.3 East Midlands 4172 4.2 76.5 10.97 92.7 West Midlands 5267 5.5 74.3 11.03 91.2 Eastern 5388 3.5 79.2 12.79 111.7 London 7172 6.6 70.9 15.55 119.4 South East 8001 4.0 80.1 13.62 111.6 South West 4928 3.6 79.0 11.28 97.5 Wales 2903 6.1 68.5 10.47 90.4 Scotland 5062 6.8 73.1 11.04 94.8 Northern Ireland1685 5.6 67.5 _ 85.9 United Kingdom58789 5.2 74.1 12.04 100 Sources and notes: 1. 2001 Census of Population – figures are in thousands. 2. Labour Force Survey (LFS), Spring Quarter 2002 – based on the International Labour Organisation (ILO)’s definition of unemployment. 3. LFS, Spring Quarter 2002 – Percentage of the working aged population who are in employment. 4. New Earnings Survey (NES), 2003 – Gross average hourly earnings of full-time workers in pounds. No data available for Northern Ireland so the average relates to Great Britain rather than the UK. 5. Office for National Statistics (ONS), 1999 – Disposable household income per capita as a percentage of the UK average.
36
TABLE 2 UK Inter-Regional Migration Flows: 1981 - 2002 Inflow Outflow 19811986 1991 1996 1998 1999 200020012002198119861991 1996 1998 1999 2000 2001 2002 North East31 36 40 39 39 39 39 40 43 39 46 41 45 44 44 43 43 41 North West102 112 96 105 104 105 106 106 109 122 138 123 114 116 115 111 110 108 Yorkshire and the Humber 68 79 85 91 93 95 97 96 100 73 91 85 98 98 97 96 96 95 East Midlands77 102 90 102 108 111 112 115 120 72 85 81 94 97 96 95 96 97 West Midlands67 87 83 91 93 94 94 95 99 79 95 88 101 101 102 101 102 103 Eastern 121 145 122 139 143 148 146 147 150 104 128 113 121 124 126 125 127 130 London 155 183 149 168 171 163 163 160 155 187 232 202 213 218 228 232 244 262 South East202 243 198 228 226 229 224 224 229 166 204 185 199 207 209 210 216 220 South West108 149 121 139 139 143 140 143 146 88 103 99 110 111 111 111 111 111 Wales 45 55 52 55 56 58 59 60 64 42 50 47 53 54 53 52 51 50 Scotland 47 44 56 47 53 51 49 56 53 48 58 47 54 54 55 53 50 48 Northern Ireland 7 9 12 11 12 12 11 13 11 10 15 9 12 12 12 12 11 11 Source: National Health Service Central Register (NHSCR) Note: Figures are in thousands
TABLE 3
Labour Market Indicators for Welsh Unitary Authorities
Unemployment
Rhondda;Cynon;Taff 6.2 63.9 9.69 13.0
Swansea 6.2 70.6 10.06 9.8
1. 2001 Census of Population – this measure of unemployment is based on responses to a question which asked the economic activity of the individual the week before the Census. This is compatible with the ILO’s definition of economic status. The denominator is the economically active population (including economically active students). The resultant unemployment rate is very similar to that from the ILO definition (the UK rate was 4.9% and the Welsh rate 5.8% in Spring 2001), without suffering from the small samples that affect the accuracy of sub-regional statistics using the LFS.
2. LFS, March 2000-February 2001 – Percentage of the working aged population who are in employment.
3. NES, 2003 – Gross average hourly earnings of full-time workers in pounds.
Figure for UK relates to Great Britain.
4. 2001 Census of Population – Percentage of population aged 16 and over described as permanently sick. Figure for UK relates to England and Wales.
5. Valley UAs in bold.